China’s Central Bank Calls for More Government Oversight on Blockchain

China’s central bank the People’s Bank of China (PBC) encouraged the government to increase supervision of blockchain-related ventures in a working paper released on Tuesday, warning that “bubbles were apparent,” according to Reuters.

‘Cannot Disrupt the Market’

The abstract of the paper, entitled ‘What Blockchain Can Do, and What it Can’t Do’ states the approach the PBC’s Research Bureau took in dissecting blockchain technology and examining it from an economic perspective, stating:

“…by explaining blockchain technologies from an economic perspective, it introduces the Token Paradigm to summarize mainstream blockchain systems, discusses the true meaning of consensus and trust in the blockchain field, and analyzes the functions of smart contract [sic].”

Translated excerpts from the working paper via CCN China show a pessimistic view of blockchain technology, especially as the disruptor to the financial system crypto supporters claim it will be. The report warns readers not to “exaggerate the function of the blockchain,” adding, “So far, no technological innovation has had a disruptive impact on the financial system, and blockchain is no exception.”

The PBC also issued a notice to investors in September warning of the risks involved with cryptocurrency, and the new working paper calls blockchain “superstitious” according to translations. The paper asserts that there is no flexibility in the supply of digital currencies and that a lack of intrinsic value support is also a problem.

Still Exploring Crypto

The paper does indicate that there are some places within China’s financial structure where blockchain technology could be helpful if applied, specifically noting the country’s digital bill trading platform. Still, the PBC says it’s “very difficult to replace institutions and trust with technology.”

Despite calling blockchain enthusiasm “superstitious” and saying that it would only be possible to completely replace the current financial system with a crypto-based on in a utopian scenario, the PBC does appear to have its hand in crypto projects of its own.

CryptoSlate reported in October that the PBC is hiring several new employees with backgrounds in cryptography, computer science, and finance to develop its own “digital fiat currency.” The bank, in fact, sought out those with blockchain experience to fill these roles, as well as people with a background in big data.

Early last month, a researcher at the PBC published an op-ed in the bank-owned CN Finance magazine calling for more research into a government-backed stablecoin pegged to the Yuan, saying that U.S. stablecoins pegged to the dollar showed promise.